Price optimization in financial services firms is slowly, but surely, moving towards relationship based pricing — and the UK is clearly ahead of the US. The second annual Profit-Based Pricing Forum was held in Camberley, Surrey — just outside of London, on September 26th and 27th, 2007. Sponsored by Nomis Solutions, a profit-based pricing vendor specializing in financial services, the attendance was more than double that of last year. Representatives from all the large financial organizations in the UK, as well as from consultant and motor finance firms comprised this growing audience.

Peter Jobst, Managing Director, BenchMark Consulting International Europe stated, “We were very pleased with the results of this survey because it validates that the U.K. market recognises the integral role of price optimization in achieving their objectives and is as engaged as the U.S. and Canadian market in adopting this type of technology."

For a free copy of the survey results please contact Kathryn Barry at Kathryn.Barry@nomissolutions.com

"Price optimization solutions present an outstanding opportunity for lenders, especially to optimize their profits as well as their application pull-through rates while still managing the various risks associate with particular loans or customers. It is important to note that price optimization does not recommend or demand increasing all loan prices or decreasing all deposit prices. Rather, it requires a financial institution to understand customers demand for products and services and their sensitivity to price. Thus, in the case of the loan, it establishes both the price the customer is willing to pay for a loan and the acceptable rate of return for the lender.

"Consumers are beginning to look at their financial institutions (FSIs) for a better deal - one based on the value and longevity of their relationship. Some FSIs are engaged in price optimization, but no one has successfully evolved that technology into the idea of dynamically pricing new products and services based on the customer's profitability. FSIs will need to implement this pricing technique in order to remain competitive, and those that do it first could gain significant market share. The steps to getting there include an enterprise focus on customer centricity, a collaborative technology partner, and development of a pricing center of excellence."

"Price Optimization is often evaluated in the context of building broader customer relationships, and pricing on the basis of that total relationship. But price optimization - and the resulting increase in profits that results - is a good thing in itself, and should be pursued (even tactically at the product or line-of-business [LOB] level) almost regardless of any other future enterprise-wide strategic consideration. Forgone profits cannot be regained: Pilot projects to test the suitability of price optimization in a particular situation should be started as soon as possible."

"All lenders surveyed have goals to increase volume and increase margins in 2007," said Brian King, consumer lending practice manager at BenchMark Consulting. "Canadian financial institutions are realizing the value of advanced analytics and price optimization to most effectively price their products to their various customer segments in order to better achieve their business performance goals."

For a free copy of the survey results please contact Kathryn Barry at Kathryn.Barry@nomissolutions.com

"Financial institutions are starting to take a lesson from retailers by considering price optimization as a strategy to reward relationships and ultimately grow them. Retail FSIs must build new pricing strategies that incorporate price elasticity of demand, individual relationship value, multiple consumer inputs, and dynamic pricing capabilities. The vendor marketplace is opening up, and there are several software firms that offer tools and consulting to help FSIs get started."

BenchMark Consulting International's Home Equity Lending Practice Manager, J. Brian King, whose team conducted the survey, said, "I believe that the Home Equity Lending marketplace is going to experience major changes in the next two years.

Leading banks are now starting to investigate innovative ways to differentiate themselves and to strategically squeeze more profits in some areas of the business while maximizing market share in others. While conducting this survey, I was impressed by the number of Home Equity Lending executives that are planning to use pricing more strategically to meet their business goals."

For a free copy of the survey results please contact Kathryn Barry at Kathryn.Barry@nomissolutions.com

"As the pendulum swings from the cost cutting, down-sizing and right-sizing of the '90's and early 2000's to price optimization, the internal pricing function will rise to new levels of importance within the organization.

Early adopters of Profit-based Pricing will garner the greatest benefits, others are leaving money on the table."

Walter Cunningham, director at BenchMark Consulting, said, "Auto Finance lenders recognize that pricing can be used as a strategic lever and that pricing processes can be significantly bolstered to better support the corporate goals of profit and market share growth."

For a free copy of the survey results please contact Kathryn Barry at Kathryn.Barry@nomissolutions.com